Aust finances among strongest: Moody's

Australia has one of the strongest financial positions among the top rated triple A sovereign countries, Moody's Investors Service says.

The global credit rating agency has published its annual analysis of Australia and says the outlook for the Aaa foreign and local currency ratings remains stable.

The Moody's rating is supported by four factors - very high economic strength; very high institutional strength; very high government financial strength, and very low susceptibility to event risk.

Over the medium term, Australia's economic growth should return to trend levels of three to 3.5 per cent seen before the 2008-2009 global financial crisis on the back of the mining sector boom and associated strong investment.

"The risks to this scenario are primarily from external factors - global and East Asian growth and financial market developments - that could affect Australia because of its dependence on external finance," says the Moody's report released on Tuesday US time.

It said Australia's institutional strength is very high, reflecting overall governance, rule of law, effective monetary and regulatory institutions, and transparency.

At the same time, Commonwealth government and general government debt remains low by global standards and noted the federal government's 2012/13 budget forecasts debt to fall.

"As a result, the Commonwealth will continue to have one of the strongest financial positions among Aaa-rated governments," it said.

While commodity-price and exchange-rate volatility continues to affect the economy, the most important risk is Australia's reliance on offshore funding to finance investment.

"As a result of the high investment level, the country has consistently run current account deficits and built up one of the largest negative net international investment positions among advanced economies," Moody's said.

"Australia contrasts with some other current account deficit countries in that it also has a relatively high saving rate, but the level of investment is even higher."